Search form

Protecting Private Property Rights from Regulatory Takings

Subcommittee on Constitution
Committee on Judiciary
United States House of Representatives

Mr. Chairman, distinguished members of the subcommittee:

My name is Roger Pilon. I am a senior fellow at the Cato
Institute and the director of Cato’s Center for Constitutional
Studies.

I want to begin by thanking Congressman Hyde for inviting me to
speak before this subcommittee on the subject of Protecting Private
Property Rights from Regulatory Takings. I want also to thank
Congressman Canady for calling hearings so early in the term of the
104th Congress on so important and timely a subject.

Uncompensated regulatory takings of private property have become
an immense problem across the nation. As federal, state, and local
regulations have increased in number and scope, property owners
have increasingly found themselves unable to use their property and
unable to recover the losses that result.

The problem begins, therefore, with the growth of government
regulations that deny owners the legitimate use of their property.
It should end with the relief that courts might give in the form of
compensation to those owners, as required by the Fifth Amendment’s
Takings Clause. Unfortunately, the courts have been locked into
what the Supreme Court itself has called 70-odd years of ad hoc
regulatory takings jurisprudence. As a result, they give relief in
only a limited range of cases. That means that property owners,
both large and small, bear the full costs of the public goods the
regulations bring about, when in all fairness those costs should be
borne by the public that orders those goods in the first place.

As the voters made clear last November in race after race, the
protection of property rights is a burning issue on which they want
action. The time has come for Congress to address this issue, to
redress the wrongs that have been imposed on individual owners by
Congress itself and by countless state and local officials.

To do that, Congress needs to reexamine the vast regulatory
structure it has erected—largely over the course of this century—
to determine whether those regulations proceed from genuine
constitutional authority and whether they are consistent with the
rights of the American people to regulate their own lives. But
second, and more immediately, Congress needs also to breathe new
life into the Fifth Amendment’s Takings Clause, making it clear to
a Court too encumbered by its past that the clause means precisely
what it says when it prohibits government from taking private
property for public use without just compensation.

Let me address those two issues, the first briefly, the second
in somewhat more detail.

1. Relimit Government in the Constitution

The federal government, as every student of the Constitution
learns, is a government of delegated, enumerated, and thus limited
powers. Delegation from the people gives power its legitimacy.
Enumeration limits that power. Unfortunately, that doctrine of
enumerated powers, which the Framers meant to be the centerpiece of
the Constitution, today is honored in the breach. Whereas earlier
congresses asked first whether they had constitutional authority to
undertake whatever proposal might be before them, and earlier
presidents vetoed measures for lack of such authority, the 20th-
century concern has been to pursue public ends without even asking
whether the Constitution permits those pursuits. And the Court,
following Franklin Roosevelt’s notorious Court-packing scheme, has
largely looked the other way, inventing doctrines about Congress’s
commerce and spending powers that are no part of the Constitution—
indeed, that are in direct contradiction to the very purpose and
design of the Constitution. The result has been the regulatory and
redistributive juggernaut that has produced the Leviathan we now
call government in America.

Because I have addressed this issue in some detail in the Cato
Institute’s new Handbook for Congress, which was released here in
the Capitol and distributed to each member just this week, I will
limit myself today to saying simply that if we are to come to grips
with the problem of regulatory takings, the first order of business
is to start thinking seriously about rolling back many of the
regulations that are doing the taking. And the most fundamental way
to do that is to revisit the centerpiece of the Constitution, the
doctrine of enumerated powers. If this subcommittee were to do
that, it would soon discover, I submit, that much of the regulation
that plagues property owners across this nation today—and not
property owners alone, let me note—is unconstitutional because
undertaken without explicit constitutional authority. Right from
the start, that is, there is a constitutional problem. A Congress
imbued with the idea that we need to relimit government in
fundamental ways, as this Congress surely is, should appreciate
that to go forward we need first to look back, to our founding
principles. And what better part of Congress to do that than this
Subcommittee on the Constitution?(1)

But even if Congress were to do nothing about relimiting its
power in so fundamental a way, even if it were to continue on the
regulatory path it has followed for most of this century, there
would remain the problem of what to do when the exercise of such
overweening power takes property—and the courts, acting almost as
if they were extensions of the political branches, refuse to order
the compensation the Constitution requires. This brings me to my
principal concern in these hearings, that Congress make crystal
clear its view that the Fifth Amendment’s Takings Clause is meant
to compensate owners when regulatory takings of otherwise
legitimate uses reduce the value of their property.

2. Breathe New Life Into the Takings Clause

The Fifth Amendment’s Takings Clause reads: “nor shall private
property be taken for public use without just compensation.” As
presently interpreted by the Court, that clause enables owners to
receive compensation when their entire estate is taken by a
government agency and title transfers to the government; when their
property is physically invaded by government order, either
permanently or temporarily;(2) when regulation for other than
health or safety reasons takes all or nearly all of the value of
the property;(3) and when government attaches unreasonable or
disproportionate permit conditions on use.(4)

Although that list of protections might seem extensive, a
moment’s reflection should indicate the problem—and it is a very
large one. Most regulations do not reduce the value of a person’s
property to zero or near zero. Rather, they reduce the value by 25
percent, 50 percent, or some other fraction of the whole. In those
circumstances—the vast majority of circumstances—the owner gets
nothing. Only if he is “lucky” enough to be completely wiped out by
a regulation does he get compensation. Surely that is not what the
Framers meant to happen when they wrote the Takings Clause.

Plainly, the Court has gone about its business backwards. Rather
than ask whether there has been a taking and then ask what the
value of that taking is, the Court asks what the value of the loss
is to determine whether there has been a taking. And it has done
that because it has never set forth a well-thought-out theory of
takings, one that starts from the beginning and works its way
systematically to the end. It is just such a clear statement of the
matter that Congress needs to provide.

A. Provide a clear definition of “property.” In providing such a
statement, the first and most important order of business is to
give a clear definition of “property.” In every area of the law
except the law of public takings, as every first-year law student
learns, “property” refers not simply to the underlying estate but
to all the uses that can be made of that estate. James Madison put
the point well in his essay on property: “as a man is said to have
a right to his property, he may be equally said to have a property
in his rights.”(5) Take one of those rights—one of those sticks in
the “bundle of sticks” we call “property”—and you take something
that belongs to the owner. Under the Fifth Amendment, compensation
is due to that owner.

When “property” means simply the underlying estate, however,
then government can take all the uses that go with the property—
leaving the owner with the empty shell of ownership—and get out
from under the compensation requirement. That definition is what
many opponents of greater protection for property owners have
argued for. But it is also, by implication, the definition the
Court starts from, making an exception only when the loss of use
(and value) becomes near total. When a thief takes 75 percent of
his victim’s property, no one has difficulty calling that a taking.
When government does the same thing, however, the Court has been
unable to call it a taking.

Congress must make it clear, therefore, that “property” includes
all the uses that can be made of a holding—the very uses that give
property its value, the taking of which diminishes that value. When
those uses are taken through regulatory restrictions, the owner
loses rights that otherwise belong to him.

B. Provide for a nuisance exception to the compensation
requirement. Not all the uses an owner may make of his property are
legitimate. When regulation prohibits wrongful uses, no
compensation is required.

Owners may not use their property in ways that will injure their
neighbors. Here the Court has gotten it right when it has carved
out the so-called nuisance exception to the Constitution’s
compensation requirement. Thus, even in those cases in which
regulation removes all value from the property, the owner will not
receive compensation if the regulation prohibits an injurious use.
(Such cases are likely to be very rare, of course, since there is
usually some other productive use the property can be put to.)

In carving out such a nuisance exception, however, care must be
taken to sweep neither too broadly nor too narrowly. This
exception, in essence, is the police power exception. As has long
been recognized, a broad definition of the police power will devour
the compensation requirement, leaving owners with no protection at
all. That has been the trend over the 20th century, with every
regulation “justified” as serving someone’s or some majority’s
conception of “the public good.”

By the same token, if the police power is defined too narrowly,
then property owners themselves might suffer when their neighbors
are thereby able to despoil the neighborhood through injurious
uses. This is a concern that environmentalists who oppose greater
protection for property owners often misstate, even if the concern
itself is not without foundation.

In general, the police power—through which nuisances are
regulated or prohibited—needs to be defined with reference to its
origins. It is, as John Locke put it, the “Executive Power” to
secure our rights, which each of us has in the state of nature,
before we yield it up to the state to exercise on our behalf.(6)
Accordingly, just as the origins of the police power are in the
power to secure rights, so too the limits of the power are set by
the rights that we have to be secured. Properly conceived and
derived, therefore, the police power is exercised to secure rights
—and only to secure our rights. Its origins, and justification,
set its limits.

In defining the nuisance exception, therefore, care must be
taken to tie it to a realistic conception of rights, which the
classic common law more or less did. Thus, uses that injure a
neighbor through various forms of pollution (e.g., by particulate
matter, noises, odors, vibrations, etc.) or through exposure to
excessive risk count as classic common-law nuisances because they
violate the neighbor’s rights. They can be prohibited, with no
compensation owing to those who are thus restricted.

By contrast, uses that “injure” one’s neighbor through economic
competition, say, or by blocking “his” view (which runs over your
property) or offending his aesthetic sensibilities are not
nuisances because they violate no rights the neighbor can claim.
Nor will it do to simply declare, through positive law, that such
goods are “rights.” Indeed, that is the route that has brought us
to where we are today. After all, every regulation has some reason
behind it, some “good” the regulation seeks to bring about. If all
such goods were pursued under the police power—as a matter of
right—then the owners from whom the goods were taken would never
be compensated. The police power would simply eat up the
compensation requirement.

It is important to recognize, however, that relating the police
power to the compensation requirement of the eminent domain power
is not simply a matter of “balancing” the two. Rather, those powers
must be related in a principled way, and that way is found in the
classic common-law theory of rights, which grounds rights in
property. The principle, in fact, is just this: People may use
their property in any way they wish, provided only that in the
process they do not take what belongs free and clear to others. My
neighbor’s view that runs over my property does not belong free and
clear to him. (If he wants that view, he can offer to buy it from
me by purchasing an easement.) His peace and quiet, however, do
belong to him free and clear.(7)

Now I enter into details of the kind just discussed because
there has been a considerable amount of confusion to date in
popular discussion about just how legislation aimed at protecting
property owners would work. On one hand, many environmentalists
have charged that such legislation would require taxpayers to pay
polluters not to pollute. Nothing could be further from the truth.
A well-crafted statute would make it clear that property could not
be put to injurious uses, as just defined. Regulations prohibiting
such uses would thus not give rise to compensation because those
uses are wrongful to begin with.

But on the other hand, others have charged that even if such
legislation is well-crafted to ensure that people are not
compensated for not doing what they have no right to do in the
first place, the net effect will still be either a restraint on
regulation or a drain on the taxpayer. To that charge, there is a
simple, straightforward answer: That is exactly as it should be—
exactly what the Takings Clause is for. That is why the Framers put
the clause in the Constitution—to restrain government or, failing
that, to make the public pay for the goods it wants rather than
have the costs of those goods fall on individual victims, as they
do today.

C. Paying for public goods. Just as there are no free
lunches—someone pays for them—so too there are no free public
goods. As noted earlier, every regulation seeks to bring about some
public good. Some of those goods are brought about in the course of
securing our rights. A good deal of the environmental legislation
that Congress has passed, for example, amounts to just that, to
prohibiting people from violating the rights of others. That kind
of regulation is thus not reached by the Takings Clause.

Other regulations, however, cannot be justified as bringing
about anything to which anyone can be said to have a right. We do
not have rights to views, for example, even lovely ones, unless we
own the conditions that give rise to those views. So too with
greenspaces, or historic sites, or habitat for endangered species,
and much else. None of which is to say that those goods are not
good or valuable. They may very well be. But as with anything else
that may be of value, we must obtain those goods legitimately. We
cannot just take them. Yet that, too often, is what we do
today.

Taking something that way does not make it free, of course,
except to us. To the person from whom we take it, our action is
very costly. Those who are concerned about the effect of takings
legislation on the taxpayer, therefore, are asking the wrong
question. The proper question is not how much such legislation will
cost the taxpayer but how much the goods we acquire through
regulation are costing period. Right now we have no way of knowing
because we have driven the accounting “off budget.” The direct
costs are borne by the millions of people we prevent from using
their property. The indirect costs, in unrealized opportunities,
are borne by all of us. In neither case do we have the remotest
idea of the costs. Yet those costs are nonetheless real—as
occasionally successful litigation on the first category of costs
makes clear.

But our inability or unwillingness to account for the costs of
the public goods we acquire through regulation has another effect
as well, namely, that we demand more of the goods than we otherwise
would if we had to pay for them. Not every species may be worth
preserving—except, of course, if its preservation is “free.” The
Takings Clause, then, was a brilliant stroke. When they wrote it,
the Framers realized that there would be times when the public
would have to achieve public ends by taking property from private
parties. That “despotic power” of eminent domain had to be
accompanied, however, by just compensation, for only if the victim
was made whole would the power have any semblance of
justification.

To do otherwise would be to make the individual bear the full
burden of the public’s appetite.

But the compensation requirement served to discipline the
public’s appetite as well, for without it, the demand for public
goods would in principle be infinite. That is exactly what has
happened today. Without the discipline that is provided by the
compensation requirement, regulations have grown and grown. It is
time to rein in that growth as the Framers meant it to be reined
in. The public appetite has been undisciplined for too long and the
victims today, both direct and indirect, are too numerous to let
this go on any longer.

(1) I have discussed these issues more fully in Roger Pilon,
“Freedom, Responsibility, and the Constitution: On Recovering Our
Founding Principles,” 68 Notre Dame Law Review 507 (1993).